New Service Business Proposal The purpose of the following paper is to be able to inform the reader about a business proposal of a new service for the financial industry. In the current financial industry, banks,

New Service Business Proposal

The purpose of the following paper is to be able to inform the reader about a business

proposal of a new service for the financial industry. In the current financial industry, banks,

mortgage brokers and credit unions depend on reliable and fast paced information about their

customers’ credit to make important and timely business decisions. These financial institutions

depend on reliable information in order to make sound business decisions weather to grant a loan

for a house, a car or any other reason. Due to a current economic recession, numerous

individuals have suffered various economic woes, which have compromised their credit scores.

The three credit bureaus, Equifax, Trans Union and Experian are all providing a sea of data from

three different sources. This data is often compromised by the fact that it’s not up to date, and it

is often difficult to compile this data into one, simple, readable report. This is where our

company, CoreLogic Credco comes in to assist our many clients such as banks, mortgage

brokers and credit unions. Our recently developed, new service is to provide our customers a

360 degree business information and solutions package. The main part of that package is an

Instant Merge Three Bureau Credit Report. It is the most widely accepted merged credit report in

the mortgage industry, combining credit data from one, two or all three national credit bureaus

into a convenient single report in a common format. This is an ideal fit for most lending

situations.

Increasing Revenue

Here at Credco, we have a plan on increasing revenue from our new service. By utilizing

our patented Instant Merge system, we are providing our customers with an accurate, balanced

representation of any borrowers’ credit history. Only the most up-to-date trade line information

New Service Business Proposal

appears on the report, giving our customers a complete picture of their clients’ credit history. If

our customers attempt to get similar information from the credit bureaus, they would have to pay

a fee for three separate reports, which would total close to fifty dollars per report. However, with

our three bureau merged report, we are planning to charge a standard price of fifteen dollars. The

way we are able to do this is due to our contract with the bureaus. By promising to order millions

of reports directly from the bureaus annually, we are able to get a significant price break from

the three bureaus. Consequently, most financial institutions will be coming onboard with us in

order to take advantage of a fifteen dollar three bureau merged report, therefore increasing our

revenue.

Profit Maximizing Quantity

Due to the fact that CoreLogic Credco is a competitive firm, it is a price taker, so the

company can maximize its economic profit or minimize the loss only by adjusting its output

(McConnell, 2009). The way that Credco is going to determine the profit maximizing quantity is

by total revenue and total cost. So in order to accomplish that, Credco will have to ask if we

should produce this product (credit report), in what amount and what kind of loss will the

company face (McConnell, 2009)? As mentioned above, Credco has set up a contract with the

three bureaus promising to pull millions of reports, and selling them to Credco customers for

much cheaper, however, the company has to be careful in the amount of reports that are being

order each year, if too many reports are pulled, than Credco will start loosing money. That’s

why, Credco marketing department determined that no more than three million credit reports can

be ordered annually. This presents no problem to Credco customers, due to the fact that on

average, only about two and a half million reports are ordered.

New Service Business Proposal

Marginal Costs

A competitive firm compares the marginal revenue and marginal cost of each successive

unit of output. If the marginal cost of a unit of output exceeds its marginal revenue, the firm

should not produce that unit (McConnell, 20090). In order to determine the marginal profit,

CoreLogic Credco would need to figure out the number of customers and number of credit

reports that would be ordered from Credco annually and compare it to the costs incurred by the

company from pulling those report from the three credit bureaus. Then compare those two

figures and skew them in a manner where Credco would make a profit. Without this information,

Credco would have to forecast the amount of reports pulled and possibly implement service

charge fees and set up fees for new and existing customers in order to combat unforeseen costs.

Pricing and Non Pricing Strategies

Here at CoreLogic Credco we are striving to keep our pricing basic in order to avoid

upsetting our customers and add to an irregularity of business within our company. We are going

to price all three bureau credit reports at fifteen dollars per report. However, in order to create a

cash buffer zone for us in case that our profit and loss predictions are off, we are going to

implement a bureau surcharge fee of twenty five cents for each borrower and each bureau. That

means that the completed price of a report after bureau surcharges is going to be anywhere from

fifteen dollars and seventy five cents for a single borrower or sixteen dollars and fifty cents for a

joint credit report. The increase in price is insignificant, but when added a few million times

creates a large cash buffer for the company.

Barriers to Entry

New Service Business Proposal

In pure monopoly, strong barriers to entry effectively block all potential competition

(McConnell, 2009). In the case of CoreLogic Credco, it would be difficult to create barriers to

entry due to the fact that the company’s competitors also have the right to set up contracts with

the bureaus with a promise to pull millions of credit reports per year, therefore receiving a lower

price. Since Credco won’t be able to monopolize the business on price alone, the company will

have to excel in service implementation and customer experience.

Product Differentiation

Due to the fact that Credco will face numerous competitors also offering tri merge credit

reports at a cheaper price, the company will have to increase product differentiation. In contrast

to pure competitions, monopolistic competition is distinguished by product differentiation

(McConnell, 2009). The company can increase product differentiation by creating a website

which is very user friendly. This website will be extremely easy to navigate even for novice

mortgage officers. The tri merge credit reports will also be extremely easy to read and

understand, with icons and explanations. Creating a user friendly experience for the customer

will increase product differentiation.

Minimizing Costs and Conclusion

Profitability has always been important for every business. However, in the current

business climate, minimizing costs is the one way to ensure profitability and survivability for a

business. Companies are looking for ways to minimize costs more than they ever had before.

One way that CoreLogic Credco could minimize costs even further would be to create a quick

and easy way to deliver the tri merge credit reports to their customers. This can be done by

making the reports machine readable. By having this function, customers could instantaneously

New Service Business Proposal

download tri merge credit reports into their mortgage software directly from the Credco website,

which instantly pulls the three reports from the three credit bureaus and automatically merges it

into one concise report. Consequently, this eliminates a need to fax reports, email them or send

them via priority mail, which keeps costs down. This business plan creates an outline of a new

service developed in a very quick and efficient way to Credco customers, therefore ensuring that

CoreLogic Credco remains a leader in the credit reporting and finance industry.

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